Topic: Deposit

JOSEPH CHAN, WILSON CHAN and LILY CHAN vs. BONIFACIO MACEDA of time and had no notice of hearing. The trial court declared petitioners in
default.
FACTS: Petitioners sought to annul with RTCs decision with the CA, but this was
Bonifacio Maceda obtained a P7.3 million loan from the Development Bank dismissed. Petitioners elevated the case to the SC which affirmed the order
of the Philippines (DBP) for the construction of his New Gran Hotel Project. of the CA.
Maceda entered into a building construction contract with Moreman
Builders where they agreed that the construction would be finished by Deponent Conge, a labor contractor, testified that he was contracted by Lily
December 22, 1977. Maceda purchased various construction materials and Chan to get bags of cement from the New Gran Hotel construction site and
equipment in Manila. Moreman then deposited them in the warehouse of store them into her warehouse. Deponent also hauled about 400 bundles of
Wilson and Lily Chan. The deposit was free of charge. Moreman failed to steel bars. Corresponding delivery receipts were presented.
finish the construction of the hotel at the stipulated time. Maceda filed with
the CFI an action for rescission and damages against Moreman. Deponent Alfredo Maceda testified that he was Bonifacio Maceda’s
Disbursement and Payroll Officer who supervised the construction and kept
The CFI ruled for rescinding the contract between Moreman and Maceda, inventory of the properties of the New Gran Hotel. While conducting an
awarding Maceda P445,000 as damages; P20,000 representing the increase inventory, he found that the approximate total value of the materials stored
in the construction materials; and P35,000 as attorneys fees. in petitioners warehouse was P214,310. This amount was reflected in the
certification signed by Mario Ramos, store clerk and representative of
Moreman appealed to the CA but it was dismissed for being dilatory. He Moreman who was present during the inventory.
elevated the case to the Supreme Court via a petition for review on
certiorari. The SC denied the petition. Maceda claims that petitioners, as depositaries under the law, have both the
fiduciary and extraordinary obligations not only to safely keep the
Meanwhile, during pendency of the case, Maceda ordered Jason, Wilson, construction material deposited, but also to return them with all their
and Lily Chan to return to him the construction materials and equipment products, accessories and accessions, pursuant to Articles 1972, 1979, 1983,
which Moreman deposited in their warehouse. Petitioners told Maceda that and 1988 of the Civil Code. Considering that petitioners duty to return the
Moreman already withdrew the construction materials. construction materials in question has already become impossible, it is only
proper that the prices of those construction materials in 1996 should be the
Maceda filed with the RTC an action for damages with a writ of preliminary basis of the award of actual damages. This is the only way to fulfill the duty
attachment against Joseph, Wilson, and Lily Chan. After almost 4 years, the to return contemplated in the applicable laws. Maceda further claims that
RTC dismissed the complaint for failure to prosecute and for lack of petitioners must bear the increase in market prices from 1977 to 1996
interest. After 5 years, Maceda filed a motion for reconsideration, but it was because liability for fraud includes all damages which may be reasonably
denied for failure of him and and his counsel to appear on the scheduled attributed to the non-performance of the obligation.
hearing.
ISSUE:
Maceda filed a 2nd motion for reconsideration which was granted and the Maceda’s claim for damages is based on petitioners failure to return or to
case was reinstated 10 years from the time the action was originally filed. release to him the construction materials and equipment deposited by
Petitioners filed a motion to dismiss, while Maceda moved to declare Moreman to their warehouse. Hence, the essential issues to be resolved
petitioners in default on the ground that their motion to dismiss was filed out are: (1) Has respondent presented proof that the construction materials and
equipment were actually in petitioners warehouse when he asked that the
Topic: Deposit

same be turned over to him? (2) If so, does respondent have the right to WHEREFORE, the petition is GRANTED. The challenged Decision of the Court
demand the release of the said materials and equipment or claim for of Appeals dated June 17, 1999 is REVERSED and SET ASIDE. Costs against
damages? respondent.

HELD:
Under Article 1311 of the Civil Code, contracts are binding upon the parties
(and their assigns and heirs) who execute them. When there is no privity of
contract, there is likewise no obligation or liability to speak about and thus
no cause of action arises.

Specifically, in an action against the depositary, the burden is on the plaintiff

to prove the bailment or deposit and the performance of conditions
precedent to the right of action. A depositary is obliged to return the thing to
the depositor, or to his heirs or successors, or to the person who may have
been designated in the contract.

In the present case, there is no contract of deposit, oral or written, between

petitioners and respondent. If at all, it was only between petitioners and
Moreman. And granting arguendo that there was indeed a contract of
deposit between petitioners and Moreman, it is still incumbent upon Maceda
to prove its existence and that it was executed in his favor. However, Maceda
failed to do so.

The only pieces of evidence Maceda presented to prove the contract of

deposit were the delivery receipts which were unsigned and not duly
received or authenticated by either Moreman, petitioners or Maceda or any
of their authorized representatives. Hence, the delivery receipts have no
value.

Moreover, Maceda also failed to prove that there were construction

materials and equipment in petitioners warehouse at the time he made a
demand for their return.

Since there was no contract of deposit between petitioners and Maceda or

Moreman and that actually there were no more construction materials or
equipment in petitioners warehouse when Maceda made a demand for their
return, Maceda has no right to claim for damages.
Topic: Deposit

UNITED STATES vs. JOSE IGPUARA instruments payable to order are negotiable. Hence, this instrument not
being to order but to bearer, it is not negotiable.
The Jose Igpuara was charged and found guilty estafa for swindling Juana It is also erroneous to assert that sum of money set forth in said certificate is,
Montilla and Eugenio Veraguth of P2,498 which he had taken on deposit from according to it, in the defendant's possession as a loan. In a loan the lender
the Montilla to be at Veraguth’s disposal. transmits to the borrower the use of the thing lent, while in a deposit the use
of the thing is not transmitted, but merely possession for its custody or safe-
The defendant appealed, alleging that there was no deposit. keeping.
In order that the depositary may use or dispose oft he things deposited, the
A deposit is constituted from the time a person receives a thing belonging to depositor's consent is required, and then:
another with the obligation of keeping and returning it. (Art. 1758) The rights and obligations of the depositary and of the depositor shall cease,
and the rules and provisions applicable to commercial loans, commission, or
Igpuara received P2,498, evidenced by a document declaring that they contract which took the place of the deposit shall be observed. (Art. 309,
remained in his possession. This remained in his possession in no other sense Code of Commerce.)
than to take care of them and was at the disposal of Veraguth. The defendant has shown no authorization whatsoever or the consent of the
depositary for using or disposing of the P2,498, which the certificate
Veraguth demanded restitution of the amount but Igpuara failed to do so. acknowledges, or any contract entered into with the depositor to convert the
deposit into a loan, commission, or other contract.
The appellant says: "Juana Montilla's agent voluntarily accepted the sum of That demand was not made for restitution of the sum deposited, which could
P2,498 in an instrument payable on demand, and as no attempt was made to have been claimed on the same or the next day after the certificate was
cash it until August 23, 1911, he could indorse and negotiate it like any other signed, does not operate against the depositor, or signify anything except the
commercial instrument. There is no doubt that if Veraguth accepted the intention not to press it. Failure to claim at once or delay for sometime in
receipt for P2,498 it was because at that time he agreed with the defendant demanding restitution of the things deposited, which was immediately due,
to consider the operation of sale on commission closed, leaving the collection does not imply such permission to use the thing deposited as would convert
of said sum until later, which sum remained as a loan payable upon the deposit into a loan.
presentation of the receipt." (Brief, 3 and 4.) Article 408 of the Code of Commerce of 1829, previous to the one now in
force, provided:
Then, after averring the true facts: (1) that a sales commission was precedent; The depositary of an amount of money cannot use the amount, and if he
(2) that this commission was settled with a balance of P2,498 in favor of the makes use of it, he shall be responsible for all damages that may accrue and
principal, Juana Montilla; and (3) that this balance remained in the possession shall respond to the depositor for the legal interest on the amount.
of the defendant, who drew up an instrument payable on demand, he has Whereupon the commentators say:
drawn two conclusions, both erroneous: One, that the instrument drawn up In this case the deposit becomes in fact a loan, as a just punishment imposed
in the form of a deposit certificate could be indorsed or negotiated like any upon him who abuses the sacred nature of a deposit and as a means of
other commercial instrument; and the other, that the sum of P2,498 preventing the desire of gain from leading him into speculations that may be
remained in defendant's possession as a loan. disastrous to the depositor, who is much better secured while the deposit
It is erroneous to assert that the certificate of deposit in question is exists when he only has a personal action for recovery.
negotiable like any other commercial instrument: First, because every According to article 548, No. 5, of the Penal Code, those who to the prejudice
commercial instrument is not negotiable; and second, because only of another appropriate or abstract for their own use money, goods, or other
personal property which they may have received as a deposit, on
Topic: Deposit

commission, or for administration, or for any other purpose which produces being no proof of the appropriation, the agent could not be found guilty of
the obligation of delivering it or returning it, and deny having received it, shall the crime of estafa.
suffer the penalty of the preceding article," which punishes such act as the Being in accord and the merits of the case, the judgment appealed from is
crime of estafa. The corresponding article of the Penal Code of the Philippines affirmed, with costs.
in 535, No. 5.
In a decision of an appeal, September 28, 1895, the principle was laid down
that: "Since he commits the crime of estafa under article 548 of the Penal
Code of Spain who to another's detriment appropriates to himself or
abstracts money or goods received on commission for delivery, the court
rightly applied this article to the appellant, who, to the manifest detriment of
the owner or owners of the securities, since he has not restored them,
willfully and wrongfully disposed of them by appropriating them to himself
or at least diverting them from the purpose to which he was charged to
devote them."
It is unquestionable that in no sense did the P2,498 which he willfully and
wrongfully disposed of to the detriments of his principal, Juana Montilla, and
of the depositor, Eugenio Veraguth, belong to the defendant.
Likewise erroneous is the construction apparently at tempted to be given to
two decisions of this Supreme Court (U. S. vs. Dominguez, 2 Phil. Rep., 580,
and U. S. vs. Morales and Morco, 15 Phil. Rep., 236) as implying that what
constitutes estafa is not the disposal of money deposited, but denial of
having received same. In the first of said cases there was no evidence that the
defendant had appropriated the grain deposited in his possession.
On the contrary, it is entirely probable that, after the departure of the
defendant from Libmanan on September 20, 1898, two days after the
uprising of the civil guard in Nueva Caceres, the rice was seized by the
revolutionalists and appropriated to their own uses.
In this connection it was held that failure to return the thing deposited was
not sufficient, but that it was necessary to prove that the depositary had
appropriated it to himself or diverted the deposit to his own or another's
benefit. He was accused or refusing to restore, and it was held that the code
does not penalize refusal to restore but denial of having received. So much
for the crime of omission; now with reference to the crime of commission, it
was not held in that decision that appropriation or diversion of the thing
deposited would not constitute the crime of estafa.
In the second of said decisions, the accused "kept none of the proceeds of
the sales. Those, such as they were, he turned over to the owner;" and there
Topic: Deposit

TRIPLE-V FOOD SERVICES vs. FILIPINO MERCHANTS INSURANCE COMPANY vehicle, in handling the car-napping incident and in the supervision of its
employees. It further argued that there was no valid subrogation of rights
FACTS: between Crispa and respondent FMICI.
Mary Jo-Anne De Asis dined at Triple V's Kamayan Restaurant. De Asis had a
Mitsubishi Galant Super Saloon Model 1995 with plate number UBU 955, The CA dismissed Triple V's appeal and affirmed the appealed decision of the
assigned to her by her employer Crispa Textile. De Asis availed of the valet RTC that: (a) petitioner was a depositary of the car; (b) petitioner was
parking service of Triple V and entrusted her car key to their valet counter. A negligent in its duties as a depositary thereof and as an employer of the valet
corresponding parking ticket was issued as receipt for the car. The car was attendant; and (c) there was a valid subrogation of rights between Crispa and
parked by valet attendant Madridano at the designated parking area. A few respondent FMICI.
minutes later, Madridano noticed that the car was not in its parking slot and
its key no longer in the box where valet attendants usually keep the keys of HELD:
cars entrusted to them. The car was never recovered. The SC affirmed the RTC’s and CA’s decision.
When De Asis entrusted the car in question to petitioners valet attendant
Crispa Textile filed a claim against its insurer, Filipino Merchants Insurance while eating at petitioner's Kamayan Restaurant, the former expected the
Company (FMICI). Having indemnified Crispa in the amount of P669.500 for car's safe return at the end of her meal. Thus, petitioner was constituted as a
the loss of the vehicle, FMICI, as subrogee to Crispa's rights, filed with the RTC depositary of the car.
an action for damages against Triple-V Food Services.
Triple V cannot evade liability by arguing that neither a contract of deposit
In its answer, Triple V argued that the complaint failed to aver facts to support nor that of insurance, guaranty or surety for the loss of the car was
the allegations of recklessness and negligence committed in the safekeeping constituted when De Asis availed of its free valet parking service.
and custody of the subject vehicle, claiming that it and its employees wasted
no time in ascertaining the loss of the car and in informing De Asis of the In a contract of deposit, a person receives an object belonging to another with
discovery of the loss. Triple V further argued that in accepting the the obligation of safely keeping it and returning the same. A deposit may be
complimentary valet parking service, De Asis received a parking ticket which constituted even without any consideration. It is not necessary that the
provided that "Management and staff will not be responsible for any loss of depositary receives a fee before it becomes obligated to keep the item
or damage incurred on the vehicle nor of valuables contained therein", a entrusted for safekeeping and to return it later to the depositor.
provision which is allegedly an explicit waiver of any right to claim indemnity
for the loss of the car; and that De Asis knowingly assumed the risk of loss Specious is petitioner's insistence that the valet parking claim stub it issued
when she allowed petitioner to park her vehicle, adding that its valet parking to De Asis contains a clear exclusion of its liability and operates as an explicit
service did not include extending a contract of insurance or warranty for the waiver by the customer of any right to claim indemnity for any loss of or
loss of the vehicle. damage to the vehicle.

The RTC rendered judgment in favor of FMICI, thus: The parking claim stub embodying the terms and conditions of the parking,
WHEREFORE, premises considered, judgment is hereby rendered in favor of including that of relieving petitioner from any loss or damage to the car, is
the plaintiff (FMICI) essentially a contract of adhesion, drafted and prepared as it is by the
petitioner alone with no participation whatsoever on the part of the
Triple V appealed to the CA arguing that it was not a depositary of the car and customers, like De Asis, who merely adheres to the printed stipulations
that it exercised due diligence and prudence in the safe keeping of the therein appearing. While contracts of adhesion are not void in themselves,
Topic: Deposit

yet this Court will not hesitate to rule out blind adherence thereto if they
prove to be one-sided under the attendant facts and circumstances.
Hence, Triple V cannot use its parking claim stub's exclusionary stipulation as
a shield from any responsibility for any loss or damage to vehicles or to the
valuables contained therein.

It is evident that De Asis deposited the car in question with Triple V as part of
the enticement for customers by providing them a safe parking space within
the vicinity of its restaurant. A safe parking space is an added attraction to
Triple V’s restaurant business because customers are somehow assured that
their vehicles are safely kept, rather than parking them elsewhere at their
own risk. Having entrusted the subject car to petitioner's valet attendant,
customer De Asis, like all customers, fully expect the security of her car while
at Triple V's premises or designated parking areas and its safe return at the
end of her visit at petitioner's restaurant.

WHEREFORE, petition is hereby DENIED DUE COURSE.

Topic: Deposit

CA AGRO-INDUSTRIAL DEVELOPMENT CORP vs. be a profit of P100 per square meter or a total of P280,500 for the
CA and SECURITY BANK AND TRUST COMPANY entire property. Mrs. Ramos demanded the execution of a deed of
sale which required the certificates of title. Aguirre, accompanied by
ISSUE: the Pugaos, went to Security Bank to open the safety deposit box and
Whether the contractual relation between a commercial bank and another
get the certificates of title. However, when opened in the presence of
party in a contract of rent of a safety deposit box with respect to its contents
the Bank's representative, the box did not contain the certificates.
placed by the latter one of bailor and bailee or one of lessor and lessee?
Because of the delay in the reconstitution of the title, Mrs. Ramos
FACTS: withdrew her earlier offer to purchase the lots; as a consequence
CA Agro-Industrial Development Corp, through its President, Sergio Aguirre, thereof, the CA Agro failed to realize their expected profit and filed a
and spouses Pugao entered into an agreement where the CA Agro purchased complaint for damages against Security Bank with the Court of First
from Pugao two (2) parcels of land for P350,625. A downpayment of P75,725 Instance (now Regional Trial Court) of Pasig, Metro Manila which
was paid while the balance was covered by three (3) postdated checks. docketed the same as Civil Case No. 38382.
In its Answer with Counterclaim,3 respondent Bank alleged that the petitioner
They stipulated that the titles to the lots would be transferred to CA Agro has no cause of action because of paragraphs 13 and 14 of the contract of
upon full payment of the purchase price and that the owner's copies of the lease (Exhibit "2"); corollarily, loss of any of the items or articles contained in
certificates of titles shall be deposited in a safety deposit box of any bank. The the box could not give rise to an action against it. It then interposed a
same could be withdrawn only upon the joint signatures of a representative counterclaim for exemplary damages as well as attorney's fees in the amount
of CA Agro and the Pugaos upon full payment of the purchase price. of P20,000.00. Petitioner subsequently filed an answer to the counterclaim.4
In due course, the trial court, now designated as Branch 161 of the Regional
CA Agro, through Sergio Aguirre, and the Pugaos rented a Safety Deposit Box Trial Court (RTC) of Pasig, Metro Manila, rendered a decision5 adverse to the
of Security Bank. They signed a contract of lease which contained the petitioner on 8 December 1986, the dispositive portion of which reads:
following conditions: WHEREFORE, premises considered, judgment is hereby rendered dismissing
 The bank is not a depositary of the contents of the safe and it has plaintiff's complaint.
neither the possession nor control of the same. On defendant's counterclaim, judgment is hereby rendered ordering plaintiff
 The bank has no interest whatsoever in said contents, except herein to pay defendant the amount of FIVE THOUSAND (P5,000.00) PESOS as
expressly provided, and it assumes absolutely no liability in attorney's fees.
connection therewith. With costs against plaintiff.6
The unfavorable verdict is based on the trial court's conclusion that under
Two (2) renter's keys were given to them — one to Aguirre for CA Agro and paragraphs 13 and 14 of the contract of lease, the Bank has no liability for the
the other to the Pugaos. A guard key remained with Security Bank. The safety loss of the certificates of title. The court declared that the said provisions are
deposit box has two (2) keyholes, one for the guard key and the other for the binding on the parties.
renter's key, and can be opened only with the use of both keys. CA Agro Its motion for reconsideration7 having been denied, petitioner appealed from
claims that the certificates of title were placed inside the said box. the adverse decision to the respondent Court of Appeals which docketed the
appeal as CA-G.R. CV No. 15150. Petitioner urged the respondent Court to
Then, Mrs. Margarita Ramos offered to buy from CA Agro the two (2) reverse the challenged decision because the trial court erred in (a) absolving
lots at a price of P225 per square meter which CA Agro alleged would the respondent Bank from liability from the loss, (b) not declaring as null and
void, for being contrary to law, public order and public policy, the provisions
Topic: Deposit

in the contract for lease of the safety deposit box absolving the Bank from 8. The Bank shall use due diligence that no unauthorized person shall be
any liability for loss, (c) not concluding that in this jurisdiction, as well as under admitted to any rented safe and beyond this, the Bank will not be responsible
American jurisprudence, the liability of the Bank is settled and (d) awarding for the contents of any safe rented from it. 13
attorney's fees to the Bank and denying the petitioner's prayer for nominal Its motion for reconsideration 14 having been denied in the respondent
and exemplary damages and attorney's fees.8 Court's Resolution of 28 August 1989, 15petitioner took this recourse under
In its Decision promulgated on 4 July 1989,9 respondent Court affirmed the Rule 45 of the Rules of Court and urges Us to review and set aside the
appealed decision principally on the theory that the contract (Exhibit "2") respondent Court's ruling. Petitioner avers that both the respondent Court
executed by the petitioner and respondent Bank is in the nature of a contract and the trial court (a) did not properly and legally apply the correct law in this
of lease by virtue of which the petitioner and its co-renter were given control case, (b) acted with grave abuse of discretion or in excess of jurisdiction
over the safety deposit box and its contents while the Bank retained no right amounting to lack thereof and (c) set a precedent that is contrary to, or is a
to open the said box because it had neither the possession nor control over departure from precedents adhered to and affirmed by decisions of this Court
it and its contents. As such, the contract is governed by Article 1643 of the and precepts in American jurisprudence adopted in the Philippines. It
Civil Code 10 which provides: reiterates the arguments it had raised in its motion to reconsider the trial
Art. 1643. In the lease of things, one of the parties binds himself to give to court's decision, the brief submitted to the respondent Court and the motion
another the enjoyment or use of a thing for a price certain, and for a period to reconsider the latter's decision. In a nutshell, petitioner maintains that
which may be definite or indefinite. However, no lease for more than ninety- regardless of nomenclature, the contract for the rent of the safety deposit
nine years shall be valid. box (Exhibit "2") is actually a contract of deposit governed by Title XII, Book
It invoked Tolentino vs. Gonzales 11 — which held that the owner of the IV of the Civil Code of the Philippines. 16 Accordingly, it is claimed that the
property loses his control over the property leased during the period of the respondent Bank is liable for the loss of the certificates of title pursuant to
contract — and Article 1975 of the Civil Code which provides: Article 1972 of the said Code which provides:
Art. 1975. The depositary holding certificates, bonds, securities or Art. 1972. The depositary is obliged to keep the thing safely and to return it,
instruments which earn interest shall be bound to collect the latter when it when required, to the depositor, or to his heirs and successors, or to the
becomes due, and to take such steps as may be necessary in order that the person who may have been designated in the contract. His responsibility,
securities may preserve their value and the rights corresponding to them with regard to the safekeeping and the loss of the thing, shall be governed by
according to law. the provisions of Title I of this Book.
The above provision shall not apply to contracts for the rent of safety deposit If the deposit is gratuitous, this fact shall be taken into account in determining
boxes. the degree of care that the depositary must observe.
and then concluded that "[c]learly, the defendant-appellee is not under any Petitioner then quotes a passage from American Jurisprudence 17 which is
duty to maintain the contents of the box. The stipulation absolving the supposed to expound on the prevailing rule in the United States, to wit:
defendant-appellee from liability is in accordance with the nature of the The prevailing rule appears to be that where a safe-deposit company leases
contract of lease and cannot be regarded as contrary to law, public order and a safe-deposit box or safe and the lessee takes possession of the box or safe
public policy." 12 The appellate court was quick to add, however, that under and places therein his securities or other valuables, the relation of bailee and
the contract of lease of the safety deposit box, respondent Bank is not bail or is created between the parties to the transaction as to such securities
completely free from liability as it may still be made answerable in case or other valuables; the fact that the safe-deposit company does not know,
unauthorized persons enter into the vault area or when the rented box is and that it is not expected that it shall know, the character or description of
forced open. Thus, as expressly provided for in stipulation number 8 of the the property which is deposited in such safe-deposit box or safe does not
contract in question: change that relation. That access to the contents of the safe-deposit box can
be had only by the use of a key retained by the lessee ( whether it is the sole
Topic: Deposit

key or one to be used in connection with one retained by the lessor) does not be invoked as an argument against the deposit theory. Obviously, the first
operate to alter the foregoing rule. The argument that there is not, in such a paragraph of such provision cannot apply to a depositary of certificates,
case, a delivery of exclusive possession and control to the deposit company, bonds, securities or instruments which earn interest if such documents are
and that therefore the situation is entirely different from that of ordinary kept in a rented safety deposit box. It is clear that the depositary cannot open
bailment, has been generally rejected by the courts, usually on the ground the box without the renter being present.
that as possession must be either in the depositor or in the company, it We observe, however, that the deposit theory itself does not altogether find
should reasonably be considered as in the latter rather than in the former, unanimous support even in American jurisprudence. We agree with the
since the company is, by the nature of the contract, given absolute control of petitioner that under the latter, the prevailing rule is that the relation
access to the property, and the depositor cannot gain access thereto without between a bank renting out safe-deposit boxes and its customer with respect
the consent and active participation of the company. . . . (citations omitted). to the contents of the box is that of a bail or and bailee, the bailment being
and a segment from Words and Phrases 18 which states that a contract for the for hire and mutual benefit. 21 This is just the prevailing view because:
rental of a bank safety deposit box in consideration of a fixed amount at There is, however, some support for the view that the relationship in question
stated periods is a bailment for hire. might be more properly characterized as that of landlord and tenant, or lessor
Petitioner further argues that conditions 13 and 14 of the questioned and lessee. It has also been suggested that it should be characterized as that
contract are contrary to law and public policy and should be declared null and of licensor and licensee. The relation between a bank, safe-deposit company,
void. In support thereof, it cites Article 1306 of the Civil Code which provides or storage company, and the renter of a safe-deposit box therein, is often
that parties to a contract may establish such stipulations, clauses, terms and described as contractual, express or implied, oral or written, in whole or in
conditions as they may deem convenient, provided they are not contrary to part. But there is apparently no jurisdiction in which any rule other than that
law, morals, good customs, public order or public policy. applicable to bailments governs questions of the liability and rights of the
After the respondent Bank filed its comment, this Court gave due course to parties in respect of loss of the contents of safe-deposit boxes. 22 (citations
the petition and required the parties to simultaneously submit their omitted)
respective Memoranda. In the context of our laws which authorize banking institutions to rent out
The petition is partly meritorious. safety deposit boxes, it is clear that in this jurisdiction, the prevailing rule in
We agree with the petitioner's contention that the contract for the rent of the United States has been adopted. Section 72 of the General Banking
the safety deposit box is not an ordinary contract of lease as defined in Article Act 23pertinently provides:
1643 of the Civil Code. However, We do not fully subscribe to its view that Sec. 72. In addition to the operations specifically authorized elsewhere in this
the same is a contract of deposit that is to be strictly governed by the Act, banking institutions other than building and loan associations may
provisions in the Civil Code on deposit; 19 the contract in the case at bar is a perform the following services:
special kind of deposit. It cannot be characterized as an ordinary contract of (a) Receive in custody funds, documents, and valuable objects, and rent
lease under Article 1643 because the full and absolute possession and control safety deposit boxes for the safeguarding of such effects.
of the safety deposit box was not given to the joint renters — the petitioner xxx xxx xxx
and the Pugaos. The guard key of the box remained with the respondent The banks shall perform the services permitted under subsections (a), (b) and
Bank; without this key, neither of the renters could open the box. On the (c) of this section as depositories or as agents. . . . 24 (emphasis supplied)
other hand, the respondent Bank could not likewise open the box without the Note that the primary function is still found within the parameters of a
renter's key. In this case, the said key had a duplicate which was made so that contract of deposit, i.e., the receiving in custody of funds, documents and
both renters could have access to the box. other valuable objects for safekeeping. The renting out of the safety deposit
Hence, the authorities cited by the respondent Court 20 on this point do not boxes is not independent from, but related to or in conjunction with, this
apply. Neither could Article 1975, also relied upon by the respondent Court, principal function. A contract of deposit may be entered into orally or in
Topic: Deposit

writing 25 and, pursuant to Article 1306 of the Civil Code, the parties thereto above stated, the foregoing conditions in the contract in question are void
may establish such stipulations, clauses, terms and conditions as they may and ineffective. It has been said:
deem convenient, provided they are not contrary to law, morals, good With respect to property deposited in a safe-deposit box by a customer of a
customs, public order or public policy. The depositary's responsibility for the safe-deposit company, the parties, since the relation is a contractual one,
safekeeping of the objects deposited in the case at bar is governed by Title I, may by special contract define their respective duties or provide for
Book IV of the Civil Code. Accordingly, the depositary would be liable if, in increasing or limiting the liability of the deposit company, provided such
performing its obligation, it is found guilty of fraud, negligence, delay or contract is not in violation of law or public policy. It must clearly appear that
contravention of the tenor of the agreement. 26 In the absence of any there actually was such a special contract, however, in order to vary the
stipulation prescribing the degree of diligence required, that of a good father ordinary obligations implied by law from the relationship of the parties;
of a family is to be observed. 27 Hence, any stipulation exempting the liability of the deposit company will not be enlarged or restricted by words of
depositary from any liability arising from the loss of the thing deposited on doubtful meaning. The company, in renting
account of fraud, negligence or delay would be void for being contrary to law safe-deposit boxes, cannot exempt itself from liability for loss of the contents
and public policy. In the instant case, petitioner maintains that conditions 13 by its own fraud or negligence or that of its agents or servants, and if a
and 14 of the questioned contract of lease of the safety deposit box, which provision of the contract may be construed as an attempt to do so, it will be
read: held ineffective for the purpose. Although it has been held that the lessor of
13. The bank is not a depositary of the contents of the safe and it has neither a safe-deposit box cannot limit its liability for loss of the contents thereof
the possession nor control of the same. through its own negligence, the view has been taken that such a lessor may
14. The bank has no interest whatsoever in said contents, except herein limits its liability to some extent by agreement or stipulation. 30 (citations
expressly provided, and it assumes absolutely no liability in connection omitted)
therewith. 28 Thus, we reach the same conclusion which the Court of Appeals arrived at,
are void as they are contrary to law and public policy. We find Ourselves in that is, that the petition should be dismissed, but on grounds quite different
agreement with this proposition for indeed, said provisions are inconsistent from those relied upon by the Court of Appeals. In the instant case, the
with the respondent Bank's responsibility as a depositary under Section 72(a) respondent Bank's exoneration cannot, contrary to the holding of the Court
of the General Banking Act. Both exempt the latter from any liability except of Appeals, be based on or proceed from a characterization of the impugned
as contemplated in condition 8 thereof which limits its duty to exercise contract as a contract of lease, but rather on the fact that no competent proof
reasonable diligence only with respect to who shall be admitted to any rented was presented to show that respondent Bank was aware of the agreement
safe, to wit: between the petitioner and the Pugaos to the effect that the certificates of
8. The Bank shall use due diligence that no unauthorized person shall be title were withdrawable from the safety deposit box only upon both parties'
admitted to any rented safe and beyond this, the Bank will not be responsible joint signatures, and that no evidence was submitted to reveal that the loss
for the contents of any safe rented from it. 29 of the certificates of title was due to the fraud or negligence of the
Furthermore, condition 13 stands on a wrong premise and is contrary to the respondent Bank. This in turn flows from this Court's determination that the
actual practice of the Bank. It is not correct to assert that the Bank has neither contract involved was one of deposit. Since both the petitioner and the
the possession nor control of the contents of the box since in fact, the safety Pugaos agreed that each should have one (1) renter's key, it was obvious that
deposit box itself is located in its premises and is under its absolute control; either of them could ask the Bank for access to the safety deposit box and,
moreover, the respondent Bank keeps the guard key to the said box. As with the use of such key and the Bank's own guard key, could open the said
stated earlier, renters cannot open their respective boxes unless the Bank box, without the other renter being present.
cooperates by presenting and using this guard key. Clearly then, to the extent Since, however, the petitioner cannot be blamed for the filing of the
complaint and no bad faith on its part had been established, the trial court
Topic: Deposit

erred in condemning the petitioner to pay the respondent Bank attorney's

fees. To this extent, the Decision (dispositive portion) of public respondent
Court of Appeals must be modified.
WHEREFORE, the Petition for Review is partially GRANTED by deleting the
award for attorney's fees from the 4 July 1989 Decision of the respondent
Court of Appeals in CA-G.R. CV No. 15150. As modified, and subject to the
pronouncement We made above on the nature of the relationship between
the parties in a contract of lease of safety deposit boxes, the dispositive
portion of the said Decision is hereby AFFIRMED and the instant Petition for
Review is otherwise DENIED for lack of merit. No pronouncement as to costs.
Topic: Deposit

ANGEL JAVELLANA vs. JOSE LIM, ET AL total sum of P2,686.58 stated in the document transcribed in the complaint,
the plaintiff still owed the defendants P2,915.58; therefore, they asked that
The attorney for the plaintiff, Angel Javellana, file a complaint on the 30th of judgment be entered absolving them, and sentencing the plaintiff to pay
October, 1906, with the Court of First Instance of Iloilo, praying that the them the sum of P2,915.58 with the costs.
defendants, Jose Lim and Ceferino Domingo Lim, he sentenced to jointly and Evidence was adduced by both parties and, upon their exhibits, together with
severally pay the sum of P2,686.58, with interest thereon at the rate of 15 an account book having been made of record, the court below rendered
per cent per annum from the 20th of January, 1898, until full payment should judgment on the 15th of January, 1907, in favor of the plaintiff for the
be made, deducting from the amount of interest due the sum of P1,102.16, recovery of the sum of P5,714.44 and costs.
and to pay the costs of the proceedings. The defendants excepted to the above decision and moved for a new trial.
Authority from the court having been previously obtained, the complaint was This motion was overruled and was also excepted to by them; the bill of
amended on the 10th of January, 1907; it was then alleged, on the 26th of exceptions presented by the appellants having been approved, the same was
May, 1897, the defendants executed and subscribed a document in favor of in due course submitted to this court.
the plaintiff reading as follows: The document of indebtedness inserted in the complaint states that the
We have received from Angel Javellana, as a deposit without interest, the plaintiff left on deposit with the defendants a given sum of money which they
sum of two thousand six hundred and eighty-six cents of pesos fuertes, which were jointly and severally obliged to return on a certain date fixed in the
we will return to the said gentleman, jointly and severally, on the 20th of document; but that, nevertheless, when the document appearing as Exhibits
January, 1898. — Jaro, 26th of May, 1897. — Signed Jose Lim. — Signed: 2, written in the Visayan dialect and followed by a translation into Spanish
Ceferino Domingo Lim. was executed, it was acknowledged, at the date thereof, the 15th of
That, when the obligation became due, the defendants begged the plaintiff November, 1902, that the amount deposited had not yet been returned to
for an extension of time for the payment thereof, building themselves to pay the creditor, whereby he was subjected to losses and damages amounting to
interest at the rate of 15 per cent on the amount of their indebtedness, to 830 pesos since the 20th of January, 1898, when the return was again
which the plaintiff acceded; that on the 15th of May, 1902, the debtors paid stipulated with the further agreement that the amount deposited should
on account of interest due the sum of P1,000 pesos, with the exception of bear interest at the rate of 15 per cent per annum, from the aforesaid date
either capital or interest, had thereby been subjected to loss and damages. of January 20, and that the 1,000 pesos paid to the depositor on the 15th of
A demurrer to the original complaint was overruled, and on the 4th of May, 1900, according to the receipt issued by him to the debtors, would be
January, 1907, the defendants answered the original complaint before its included, and that the said rate of interest would obtain until the debtors on
amendment, setting forth that they acknowledged the facts stated in Nos. 1 the 20th of May, 1897, it is called a deposit consisted, and they could have
and 2 of the complaint; that they admitted the statements of the plaintiff accomplished the return agreed upon by the delivery of a sum equal to the
relative to the payment of 1,102.16 pesos made on the 15th of November, one received by them. For this reason it must be understood that the debtors
1902, not, however, as payment of interest on the amount stated in the were lawfully authorized to make use of the amount deposited, which they
foregoing document, but on account of the principal, and denied that there have done, as subsequent shown when asking for an extension of the time
had been any agreement as to an extension of the time for payment and the for the return thereof, inasmuch as, acknowledging that they have subjected
payment of interest at the rate of 15 per cent per annum as alleged in the letter, their creditor, to losses and damages for not complying with what
paragraph 3 of the complaint, and also denied all the other statements had been stipulated, and being conscious that they had used, for their own
contained therein. profit and gain, the money that they received apparently as a deposit, they
As a counterclaim, the defendants alleged that they had paid to the plaintiff engaged to pay interest to the creditor from the date named until the time
sums which, together with the P1,102.16 acknowledged in the complaint, when the refund should be made. Such conduct on the part of the debtors is
aggregated the total sum of P5,602.16, and that, deducting therefrom the
Topic: Deposit

unquestionable evidence that the transaction entered into between the If the amount, together with interest claimed in the complaint, less 1,000
interested parties was not a deposit, but a real contract of loan. pesos appears as fully established, such is not the case with the defendant's
Article 1767 of the Civil Code provides that — counterclaim for P5,602.16, because the existence and certainty of said
The depository can not make use of the thing deposited without the express indebtedness imputed to the plaintiff has not been proven, and the
permission of the depositor. defendants, who call themselves creditors for the said amount have not
Otherwise he shall be liable for losses and damages. proven in a satisfactory manner that the plaintiff had received partial
Article 1768 also provides that — payments on account of the same; the latter alleges with good reason, that
When the depository has permission to make use of the thing deposited, the they should produce the receipts which he may have issued, and which he
contract loses the character of a deposit and becomes a loan or bailment. did issue whenever they paid him any money on account. The plaintiffs
The permission shall not be presumed, and its existence must be proven. allegation that the two amounts of 400 and 1,200 pesos, referred to in
When on one of the latter days of January, 1898, Jose Lim went to the office documents marked "C" and "D" offered in evidence by the defendants, had
of the creditor asking for an extension of one year, in view of the fact the been received from Ceferino Domingo Lim on account of other debts of his,
money was scare, and because neither himself nor the other defendant were has not been contradicted, and the fact that in the original complaint the sum
able to return the amount deposited, for which reason he agreed to pay of 1,102.16 pesos, was expressed in lieu of 1,000 pesos, the only payment
interest at the rate of 15 per cent per annum, it was because, as a matter of made on account of interest on the amount deposited according to
fact, he did not have in his possession the amount deposited, he having made documents No. 2 and letter "B" above referred to, was due to a mistake.
use of the same in his business and for his own profit; and the creditor, by Moreover, for the reason above set forth it may, as a matter of course, be
granting them the extension, evidently confirmed the express permission inferred that there was no renewal of the contract deposited converted into
previously given to use and dispose of the amount stated as having bee a loan, because, as has already been stated, the defendants received said
deposited, which, in accordance with the loan, to all intents and purposes amount by virtue of real loan contract under the name of a deposit, since the
gratuitously, until the 20th of January, 1898, and from that dated with so-called bailees were forthwith authorized to dispose of the amount
interest at 15 per cent per annum until its full payment, deducting from the deposited. This they have done, as has been clearly shown.
total amount of interest the sum of 1,000 pesos, in accordance with the The original joint obligation contracted by the defendant debtor still exists,
provisions of article 1173 of the Civil Code. and it has not been shown or proven in the proceedings that the creditor had
Notwithstanding that it does not appear that Jose Lim signed the document released Joe Lim from complying with his obligation in order that he should
(Exhibit 2) executed in the presence of three witnesses on the 15th of not be sued for or sentenced to pay the amount of capital and interest
November, 1902, by Ceferino Domingo Lim on behalf of himself and the together with his codebtor, Ceferino Domingo Lim, because the record offers
former, nevertheless, the said document has not been contested as false, satisfactory evidence against the pretension of Jose Lim, and it further
either by a criminal or by a civil proceeding, nor has any doubt been cast upon appears that document No. 2 was executed by the other debtor, Ceferino
the authenticity of the signatures of the witnesses who attested the Domingo Lim, for himself and on behalf of Jose Lim; and it has also been
execution of the same; and from the evidence in the case one is sufficiently proven that Jose Lim, being fully aware that his debt had not yet been settled,
convinced that the said Jose Lim was perfectly aware of and authorized his took steps to secure an extension of the time for payment, and consented to
joint codebtor to liquidate the interest, to pay the sum of 1,000 pesos, on pay interest in return for the concession requested from the creditor.
account thereof, and to execute the aforesaid document No. 2. A true In view of the foregoing, and adopting the findings in the judgment appealed
ratification of the original document of deposit was thus made, and not the from, it is our opinion that the same should be and is hereby affirmed with
least proof is shown in the record that Jose Lim had ever paid the whole or the costs of this instance against the appellant, provided that the interest
any part of the capital stated in the original document, Exhibit 1. agreed upon shall be paid until the complete liquidation of the debt. So
ordered.
Topic: Deposit

SILVESTRA BARON vs. PABLO DAVID could be rebuilt and put in operation again. Silvestra Baron, the plaintiff in
And the first of the actions before us, is an aunt of the defendant; while Guillermo
GUILLERMO BARON vs. PABLO DAVID Baron, the plaintiff in the other action; is his uncle. In the months of March,
April, and May, 1920, Silvestra Baron placed a quantity of palay in the
These two actions were instituted in the Court of First Instance of the defendant's mill; and this, in connection with some that she took over from
Province of Pampanga by the respective plaintiffs, Silvestra Baron and Guillermo Baron, amounted to 1,012 cavans and 24 kilos. During
Guillermo Baron, for the purpose of recovering from the defendant, Pablo approximately the same period Guillermo Baron placed other 1,865 cavans
David, the value of palay alleged to have been sold by the plaintiffs to the and 43 kilos of palay in the mill. No compensation has ever been received by
defendant in the year 1920. Owing to the fact that the defendant is the same Silvestra Baron upon account of the palay delivered by Guillermo Baron, he
in both cases and that the two cases depend in part upon the same facts, the has received from the defendant advancements amounting to P2,800; but
cases were heard together in the trial court and determined in a single apart from this he has not been compensated. Both the plaintiffs claim that
opinion. The same course will accordingly be followed here. the palay which was delivered by them to the defendant was sold to the
In the first case, i. e., that which Silvestra Baron is plaintiff, the court gave defendant; while the defendant, on the other hand, claims that the palay was
judgment for her to recover of the defendant the sum of P5,238.51, with deposited subject to future withdrawal by the depositors or subject to some
costs. From this judgment both the plaintiff and the defendant appealed. future sale which was never effected. He therefore supposes himself to be
In the second case, i. e., that in which Guillermo Baron, is plaintiff, the court relieved from all responsibility by virtue of the fire of January 17, 1921,
gave judgment for him to recover of the defendant the sum of P5,734.60, already mentioned.
with costs, from which judgment both the plaintiff and the defendant also The plaintiff further say that their palay was delivered to the defendant at his
appealed. In the same case the defendant interposed a counterclaim in which special request, coupled with a promise on his part to pay for the same at the
he asked credit for the sum of P2,800 which he had advanced to the plaintiff highest price per cavan at which palay would sell during the year 1920; and
Guillermo Baron on various occasions. This credit was admitted by the they say that in August of that year the defendant promised to pay them
plaintiff and allowed by the trial court. But the defendant also interposed a severally the price of P8.40 per cavan, which was about the top of the market
cross-action against Guillermo Baron in which the defendant claimed for the season, provided they would wait for payment until December. The
compensation for damages alleged to have Ben suffered by him by reason of trial judge found that no such promise had been given; and the incredulity of
the alleged malicious and false statements made by the plaintiff against the the court upon this point seems to us to be justified. A careful examination of
defendant in suing out an attachment against the defendant's property soon the proof, however, leads us to the conclusion that the plaintiffs did, some
after the institution of the action. In the same cross-action the defendant also time in the early part of August, 1920, make demand upon the defendant for
sought compensation for damages incident to the shutting down of the a settlement, which he evaded or postponed leaving the exact amount due
defendant's rice mill for the period of one hundred seventy days during which to the plaintiffs undetermined.
the above-mentioned attachment was in force. The trial judge disallowed It should be stated that the palay in question was place by the plaintiffs in the
these claims for damages, and from this feature of the decision the defendant defendant's mill with the understanding that the defendant was at liberty to
appealed. We are therefore confronted with five distinct appeals in this convert it into rice and dispose of it at his pleasure. The mill was actively
record. running during the entire season, and as palay was daily coming in from many
Prior to January 17, 1921, the defendant Pablo David has been engaged in customers and as rice was being constantly shipped by the defendant to
running a rice mill in the municipality of Magalang, in the Province of Manila, or other rice markets, it was impossible to keep the plaintiffs' palay
Pampanga, a mill which was well patronized by the rice growers of the vicinity segregated. In fact the defendant admits that the plaintiffs' palay was mixed
and almost constantly running. On the date stated a fire occurred that with that of others. In view of the nature of the defendant's activities and the
destroyed the mill and its contents, and it was some time before the mill way in which the palay was handled in the defendant's mill, it is quite certain
Topic: Deposit

that all of the plaintiffs' palay, which was put in before June 1, 1920, been executive regulation. The highest point was touched in this season was
milled and disposed of long prior to the fire of January 17, 1921. Furthermore, apparently about P8.50 per cavan, but the market began to sag in May or
the proof shows that when the fire occurred there could not have been more June and presently entered upon a precipitate decline. As we have already
than about 360 cavans of palay in the mill, none of which by any reasonable stated, the plaintiffs made demand upon the defendant for settlement in the
probability could have been any part of the palay delivered by the plaintiffs. early part of August; and, so far as we are able to judge from the proof, the
Considering the fact that the defendant had thus milled and doubtless sold price of P6.15 per cavan, fixed by the trial court, is about the price at which
the plaintiffs' palay prior to the date of the fire, it result that he is bound to the defendant should be required to settle as of that date. It was the date of
account for its value, and his liability was not extinguished by the occurence the demand of the plaintiffs for settlement that determined the price to be
of the fire. In the briefs before us it seems to have been assumed by the paid by the defendant, and this is true whether the palay was delivered in the
opposing attorneys that in order for the plaintiffs to recover, it is necessary character of sale with price undetermined or in the character of deposit
that they should be able to establish that the plaintiffs' palay was delivered subject to use by the defendant. It results that the plaintiffs are respectively
in the character of a sale, and that if, on the contrary, the defendant should entitle to recover the value of the palay which they had placed with the
prove that the delivery was made in the character of deposit, the defendant defendant during the period referred to, with interest from the date of the
should be absolved. But the case does not depend precisely upon this explicit filing of their several complaints.
alternative; for even supposing that the palay may have been delivered in the As already stated, the trial court found that at the time of the fire there were
character of deposit, subject to future sale or withdrawal at plaintiffs' about 360 cavans of palay in the mill and that this palay was destroyed. His
election, nevertheless if it was understood that the defendant might mill the Honor assumed that this was part of the palay delivered by the plaintiffs, and
palay and he has in fact appropriated it to his own use, he is of course bound he held that the defendant should be credited with said amount. His Honor
to account for its value. Under article 1768 of the Civil Code, when the therefore deducted from the claims of the plaintiffs their respective
depository has permission to make use of the thing deposited, the contract proportionate shares of this amount of palay. We are unable to see the
loses the character of mere deposit and becomes a loan or a commodatum; propriety of this feature of the decision. There were many customers of the
and of course by appropriating the thing, the bailee becomes responsible for defendant's rice mill who had placed their palay with the defendant under
its value. In this connection we wholly reject the defendant's pretense that the same conditions as the plaintiffs, and nothing can be more certain than
the palay delivered by the plaintiffs or any part of it was actually consumed that the palay which was burned did not belong to the plaintiffs. That palay
in the fire of January, 1921. Nor is the liability of the defendant in any wise without a doubt had long been sold and marketed. The assignments of error
affected by the circumstance that, by a custom prevailing among rice millers of each of the plaintiffs-appellants in which this feature of the decision is
in this country, persons placing palay with them without special agreement attacked are therefore well taken; and the appealed judgments must be
as to price are at liberty to withdraw it later, proper allowance being made modified by eliminating the deductions which the trial court allowed from the
for storage and shrinkage, a thing that is sometimes done, though rarely. plaintiffs' claims.
In view of what has been said it becomes necessary to discover the price The trial judge also allowed a deduction from the claim of the plaintiff
which the defendant should be required to pay for the plaintiffs' palay. Upon Guillermo Baron of 167 cavans of palay, as indicated in Exhibit 12, 13, 14, and
this point the trial judge fixed upon P6.15 per cavan; and although we are not 16. This was also erroneous. These exhibits relate to transactions that
exactly in agreement with him as to the propriety of the method by which he occurred nearly two years after the transactions with which we are here
arrived at this figure, we are nevertheless of the opinion that, all things concerned, and they were offered in evidence merely to show the character
considered, the result is approximately correct. It appears that the price of of subsequent transactions between the parties, it appearing that at the time
palay during the months of April, May, and June, 1920, had been excessively said exhibits came into existence the defendant had reconstructed his mill
high in the Philippine Islands and even prior to that period the Government and that business relations with Guillermo Baron had been resumed. The
of the Philippine Islands had been attempting to hold the price in check by transactions shown by these exhibits (which relate to palay withdrawn by the
Topic: Deposit

plaintiff from the defendant's mill) were not made the subject of controversy plaintiff. That this allegation was false is clearly apparent, and not a word of
in either the complaint or the cross-complaint of the defendant in the second proof has been submitted in support of the assertion. On the contrary, the
case. They therefore should not have been taken into account as a credit in defendant testified that at the time this attachment was secured he was
favor of the defendant. Said credit must therefore be likewise of course be solvent and could have paid his indebtedness to the plaintiff if judgment had
without prejudice to any proper adjustment of the rights of the parties with been rendered against him in ordinary course. His financial conditions was of
respect to these subsequent transactions that they have heretofore or may course well known to the plaintiff, who is his uncle. The defendant also states
hereafter effect. that he had not conveyed away any of his property, nor had intended to do
The preceding discussion disposes of all vital contentions relative to the so, for the purpose of defrauding the plaintiff. We have before us therefore
liability of the defendant upon the causes of action stated in the complaints. a case of a baseless attachment, recklessly sued out upon a false affidavit and
We proceed therefore now to consider the question of the liability of the levied upon the defendant's property to his great and needless damage. That
plaintiff Guillermo Baron upon the cross-complaint of Pablo David in case R. the act of the plaintiff in suing out the writ was wholly unjustifiable is perhaps
G. No. 26949. In this cross-action the defendant seek, as the stated in the also indicated in the circumstance that the attachment was finally dissolved
third paragraph of this opinion, to recover damages for the wrongful suing upon the motion of the plaintiff himself.
out of an attachment by the plaintiff and the levy of the same upon the The defendant testified that his mill was accustomed to clean from 400 to
defendant's rice mill. It appears that about two and one-half months after 450 cavans of palay per day, producing 225 cavans of rice of 57 kilos each.
said action was begun, the plaintiff, Guillermo Baron, asked for an The price charged for cleaning each cavan rice was 30 centavos. The
attachment to be issued against the property of the defendant; and to defendant also stated that the expense of running the mill per day was from
procure the issuance of said writ the plaintiff made affidavit to the effect that P18 to P25, and that the net profit per day on the mill was more than P40. As
the defendant was disposing, or attempting the plaintiff. Upon this affidavit the mill was not accustomed to run on Sundays and holiday, we estimate that
an attachment was issued as prayed, and on March 27, 1924, it was levied the defendant lost the profit that would have been earned on not less than
upon the defendant's rice mill, and other property, real and one hundred forty work days. Figuring his profits at P40 per day, which would
personal. 1awph!l.net appear to be a conservative estimate, the actual net loss resulting from his
Upon attaching the property the sheriff closed the mill and placed it in the failure to operate the mill during the time stated could not have been less
care of a deputy. Operations were not resumed until September 13, 1924, than P5,600. The reasonableness of these figures is also indicated in the fact
when the attachment was dissolved by an order of the court and the that the twenty-four customers who intervened with third-party claims took
defendant was permitted to resume control. At the time the attachment was out of the camarin 20,000 cavans of palay, practically all of which, in the
levied there were, in the bodega, more than 20,000 cavans of palay belonging ordinary course of events, would have been milled in this plant by the
to persons who held receipts therefor; and in order to get this grain away defendant. And of course other grain would have found its way to this mill if
from the sheriff, twenty-four of the depositors found it necessary to submit it had remained open during the one hundred forty days when it was closed.
third-party claims to the sheriff. When these claims were put in the sheriff But this is not all. When the attachment was dissolved and the mill again
notified the plaintiff that a bond in the amount of P50,000 must be given, opened, the defendant found that his customers had become scattered and
otherwise the grain would be released. The plaintiff, being unable or could not be easily gotten back. So slow, indeed, was his patronage in
unwilling to give this bond, the sheriff surrendered the palay to the claimants; returning that during the remainder of the year 1924 the defendant was able
but the attachment on the rice mill was maintained until September 13, as to mill scarcely more than the grain belonging to himself and his brothers;
above stated, covering a period of one hundred seventy days during which and even after the next season opened many of his old customers did not
the mill was idle. The ground upon which the attachment was based, as set return. Several of these individuals, testifying as witnesses in this case, stated
forth in the plaintiff's affidavit was that the defendant was disposing or that, owing to the unpleasant experience which they had in getting back their
attempting to dispose of his property for the purpose of defrauding the
Topic: Deposit

grain from the sheriff to the mill of the defendant, though they had previously that a deposition, once taken, may be read by either party and will then be
had much confidence in him. deemed the evidence of the party reading it. The use of the word "read" in
As against the defendant's proof showing the facts above stated the plaintiff this section finds its explanation of course in the American practice of trying
submitted no evidence whatever. We are therefore constrained to hold that cases for the most part before juries. When a case is thus tried the actual
the defendant was damaged by the attachment to the extent of P5,600, in reading of the deposition is necessary in order that the jurymen may become
profits lost by the closure of the mill, and to the extent of P1,400 for injury to acquainted with its contents. But in courts of equity, and in all courts where
the good-will of his business, making a total of P7,000. For this amount the judges have the evidence before them for perusal at their pleasure, it is not
defendant must recover judgment on his cross-complaint. necessary that the deposition should be actually read when presented as
The trial court, in dismissing the defendant's cross-complaint for damages evidence.
resulting from the wrongful suing out of the attachment, suggested that the From what has been said it result that judgment of the court below must be
closure of the rice mill was a mere act of the sheriff for which the plaintiff was modified with respect to the amounts recoverable by the respective plaintiffs
not responsible and that the defendant might have been permitted by the in the two actions R. G. Nos. 26948 and 26949 and must be reversed in
sheriff to continue running the mill if he had applied to the sheriff for respect to the disposition of the cross-complaint interposed by the defendant
permission to operate it. This singular suggestion will not bear a moment's in case R. G. No. 26949, with the following result: In case R. G. No. 26948 the
criticism. It was of course the duty of the sheriff, in levying the attachment, plaintiff Silvestra Baron will recover of the Pablo David the sum of P6,227.24,
to take the attached property into his possession, and the closure of the mill with interest from November 21, 1923, the date of the filing of her complaint,
was a natural, and even necessary, consequence of the attachment. For the and with costs. In case R. G. No. 26949 the plaintiff Guillermo Baron will
damage thus inflicted upon the defendant the plaintiff is undoubtedly recover of the defendant Pablo David the sum of P8,669.75, with interest
responsible. from January 9, 1924. In the same case the defendant Pablo David, as plaintiff
One feature of the cross-complaint consist in the claim of the defendant in the cross-complaint, will recover of Guillermo Baron the sum of P7,000,
(cross-complaint) for the sum of P20,000 as damages caused to the without costs. So ordered.
defendant by the false and alleged malicious statements contained in the Avanceña, C.J., Johnson, Malcolm, Villamor, Romualdez and Villa-Real, JJ.,
affidavit upon which the attachment was procured. The additional sum of concur.
P5,000 is also claimed as exemplary damages. It is clear that with respect to
these damages the cross-action cannot be maintained, for the reason that Separate Opinions
the affidavit in question was used in course of a legal proceeding for the
purpose of obtaining a legal remedy, and it is therefore privileged. But though JOHNS, J., dissenting and concurring:
the affidavit is not actionable as a libelous publication, this fact in no obstacle The plaintiff Silvestra Baron is the aunt of the defendant, and Guillermo
to the maintenance of an action to recover the damage resulting from the Baron, the plaintiff in the other action, is his uncle. There is no dispute as to
levy of the attachment. the amount of palay which each delivered to the mill of the defendant. Owing
Before closing this opinion a word should be said upon the point raised in the to the fact that they were relatives and that the plaintiffs reposed special
first assignment of error of Pablo David as defendant in case R. G. No. 26949. reposed special trust and confidence in the defendant, who was their
In this connection it appears that the deposition of Guillermo Baron was nephew, they were not as careful and prudent in their business dealings with
presented in court as evidence and was admitted as an exhibit, without being him as they should have been. Plaintiffs allege that their respective palay was
actually read to the court. It is supposed in the assignment of error now under delivered to the defendant at his mill with the understanding and agreement
consideration that the deposition is not available as evidence to the plaintiff between them that they should receive the highest market price for the palay
because it was not actually read out in court. This connection is not well for that season, which was P8.50 per cavan. They further allege that about
founded. It is true that in section 364 of the Code of Civil Procedure it is said August first they made another contract in and by which he promised and
Topic: Deposit

agreed to pay them P8.40 per cavan for their palay, in consideration of which entitled to more weight and is more convincing than the combined evidence
they agreed to extend the time for payment to the first of December of that of the two plaintiffs. In the very nature of things, if defendant's evidence upon
year. The amount of palay is not in dispute, and the defendant admits that it that point is true, it stands to reason that, following the custom of growers,
was delivered to his mill, but he claims that he kept it on deposit and as bailee the plaintiffs would have sold their palay during the period of high prices, and
without hire for the plaintiffs and at their own risk, and that the mill was would not have waited until it dropped from P8.50 per cavan to P6.15 per
burned down, and that at the time of the fire, plaintiffs' palay was in the mill. cavan about the first of August. Upon that question, both the weight and the
The lower court found as a fact that there was no merit in that defense, and credibility of the evidence is with the plaintiffs, and they should have
that there was but little, if any, palay in the mill at the time of the fire and judgment for the full amount of their palay on the basis of P8.40 per cavan.
that in truth and in fact that defense was based upon perjured testimony. For such reason, I vigorously dissent from the majority opinion.
The two cases were tried separately in the court below, but all of the evidence I frankly concede that the attachment was wrongful, and that it should never
in the case was substituted and used in the other. Both plaintiffs testified to have been levied. It remained in force for a period of one hundred and
the making of the respective contracts as alleged in their complaint; to wit, seventy days at which time it was released on motion of the plaintiffs. The
that they delivered the palay to the defendant with the express defendant now claims, and the majority opinion has allowed him, damages
understanding and agreement that he would pay them for the palay the for that full period, exclusive of Sundays, at the rate, of P40 per day, found to
highest market price for the season, and to the making of the second contract be the net profit for the operation of the rice mill. It further appears, and this
about the first of August, in which they had a settlement, and that the court finds, that the defendant was a responsible man, and that he had ample
defendant then agreed to pay them P8.40 per cavan, such payment to be property out which to satisfy plaintiffs' claim. Assuming that to be true, there
made on December first. It appears that the highest market price for palay was no valid reason why he could not had given a counter bond and released
for that season was P8.50 per cavan. The defendant denied the making of the attachment. Upon the theory of the majority opinion, if the plaintiffs had
either one of those contracts, and offered no other evidence on that not released the attachment, they would still be liable to the defendant at
question. That is to say, we have the evidence of both Silvestra Baron and the rate of P40 per day up to the present time. When the mill was attached,
Guillermo Baron to the making of those contracts, which is denied by the if he was in a position to do so, it was the duty of the defendant to give a
defendant only. Plaintiffs' evidence is also corroborated by the usual and counter bond and release the attachment and resume its operation. The
customary manner in which the growers sell their palay. That is to say, it is majority opinion also allowed the defendant P1,400 "for injury to the
their custom to sell the palay at or about the time it is delivered at the mill goodwill of his business." The very fact that after a delay of about four years,
and as soon as it is made ready for market in the form of rice. As stated the both of the plaintiffs were compelled to bring to their respective actions
lower court found as a fact that the evidence of the defendants as to against the defendant to recover from him on a just and meritorious claim,
plaintiffs' palay being in the mill at the time of the fire was not worthy of as found by this court and the lower court, and the further fact that after such
belief, and that in legal effect it was a manufactured defense. Yet, strange as long delay, the defendant has sought to defeat the actions by a sham and
it may seem, both the lower court and this court have found as a fact that manufactured defense, as found by this and the lower court, would arouse
upon the question of the alleged contracts, the evidence for the defendant is the suspicion of any customers the defendant ever had, and shake their
true and entitled to more weight than the evidence of both plaintiffs which is confidence in his business honor and integrity, and destroy any goodwill
false. which he ever did have. Under such conditions, it would be strange that the
It appears that the plaintiff Silvestra Baron is an old lady about 80 years of defendant would have any customers left. He is not entitled to any
age and the aunt of the defendant, and Guillermo Baron is the uncle. Under compensation for the loss of goodwill, and P5,000 should be the very limit of
the theory of the lower court and of this court, both of them at all the time the amount of his damages for the wrongful attachment, and upon that point
during the high prices held their palay in defendant's mill at their own risk, I vigorously dissent. In all other respects, I agree with the majority opinion.
and that upon that point the evidence of the defendant, standing alone is